International Financial Management - Assignment Question - Essay Example

Each party in the venture is given roles and liabilities upon the occurrence of the foreseen risk (Kumar 2007). Bento, J. P. C., 2009. Economic integration, international trade and the role of foreign direct investment : the case of Portuguese manufacturing. Berlin : Distributed in North America by Transaction Publishers. A rein-voicing center is a department or a subsidiary of a multinational company where all transactions happening inside the firm are centralized and foreign currency liabilities and receivables are netted (Kumar 2007).

A merger is a situation where two or more firms come together to form one expanded business. On the other hand, an acquisition is a situation where one firm takes over business operations of another firm and becomes the new owner (Kumar 2007). Bento, J. P. C., 2009. Economic integration, international trade and the role of foreign direct investment : the case of Portuguese manufacturing. Berlin : Distributed in North America by Transaction Publishers. The first advantage of mergers and acquisitions is that it helps a company to expand its market.

They also help a company to enjoy the economies of scale and have increased efficiency in their operations (Kumar 2007). Mergers and acquisitions also help a company to reduce on tax and legal implications. A situation where a firm with a high profitability takes over a company with low profitability helps it to reduce the tax liability. In addition to this, a company gains high competitiveness, expands its industry know how and positioning and increases profitability (Kumar 2007). Mergers and acquisitions also have some disadvantages.

They suffer from such things like decreased corporate performance and services, lowered industry innovation, decline in equity pricing, decline in investment value, increase in costs to consumers and they suppress competing businesses (Reuvid and Sherlock 2011). Expanding to new